Hannover Rueck SE · XETR:HNR1
Hannover Rueck — Hannover Rück — Conference Presentation (2004)
30 slides from Hannover Rueck's conference presentation, 2004
Slide 1: Case: Life R/I - An Alternative to P/C
Case: Life R/I - An Alternative to P/C Dr. Wolf Becke Executive Board Member Hannover Life Re ® hannover life re
Slide 2: Overview
OVERVIEW Overview Æ Section 1 Section 1 • Hannover Life Re – Who are we? - Who are we? Æ Section 2 Section 2 • Performance measurement: From statutory accounting to IVC - Perform. measurement Æ Section 3 Section 3 • Case study: IVC at Hannover Life Re UK - Case study Section 4 Æ Section 4 - Future c
Slide 3: Hannover Life Re: A status overview in 2004
HANNOVER LIFE RE: A status overview in 2004 Æ Hannover Life Re - a worldwide brand - supported by a network of operating companies, branches and service offices in Overview 19 locations on all 5 continents • 7 business centers are legal entities Section 1 - Hannover Life Re International, Hannover,
Slide 4: From nobody to a premier league player
HANNOVER LIFE RE: From nobody to a premier league player in m. € 2,800 2,534 Overview 2,220 Section 1 2,100 - Who are we? 1,436 Section 2 1,400 - Perform. measurement Section 3 ,700 414 - Case study 142 Section 4 ,0 1) 1) 1) 2) 1991 1995 1997 1999 2003 3) - Future challenges Gross written premiums C
Slide 5: The business model is unique
HANNOVER LIFE RE: The business model is unique The long-term business model of Hannover Life Re comprises of Overview five main strategic initiatives Section 1 Æ Stochastic banking activities worldwide - Who are we? • Stochastic asset swaps, new business financing, block assumption transactions in l
Slide 6: The business model is unique (cont'd)
HANNOVER LIFE RE: The business model is unique (cont'd) Æ Regular risk reassurance market in selected lines and territories Overview • Lines of business: Life, critical illness, health (niche products Section 1 only) - Who are we? • Markets: United Kingdom, Australia, South Africa, Section 2 Latin A
Slide 7: A dynamic development of US-GAAP profits
HANNOVER LIFE RE: A dynamic development of US-GAAP profits Overview 2001 2002 2003 in m. € Section 1 Gross written premiums 2,371 2,472 2,276 - Who are we? Net premiums earned 1,740 2,142 1,936 Section 2 - Perform. measurement Net retention ratio in % 73.7 86.9 85.1 Section 3 Operating profit/EBIT 5
Slide 8: US-GAAP profits are characterized by a stable trend
Overview Section 1 US-GAAP profits are characterized - Who are we? Section 2 by a stable trend - Perform. measurement Section 3 . . . but only part of the story - Case study Section 4 - Future challenges ® 6 hannover life re
Slide 9: Overview
OVERVIEW Overview Æ Section 1 Section 1 • Hannover Life Re – Who are we? - Who are we? Æ Section 2 Section 2 • Performance measurement: From statutory accounting to IVC - Perform. measurement Æ Section 3 Section 3 • Case study: IVC at Hannover Life Re UK - Case study Section 4 Æ Section 4 - Future c
Slide 10: Performance measurement: evolution from the early 90s until today
PERFORMANCE MEASUREMENT: The evolution from the early 90s until today The two early phases Overview Æ Phase 1 (up to 1991): Annual Statutory Result (ASR), Section 1 pre-tax basis, German GAAP (HGB accounting) - Who are we? Æ Phase 2 (from 1992 onwards): Introducing VIF - A major step Section 2 forwa
Slide 11: Value in force: business centers' contribution to growth of VIF
VALUE IN FORCE: Business centers and their contribution to the growth of VIF in m. € Overview 1999 2000 2001 2002 2003 Business Center Section 1 HLR International 329 401 457 480 550 - Who are we? HLR Germany (E+S Rück) 74 172 194 227 214 Section 2 HLR Africa 7 10 7 9 9 - Perform. measurement HLR Am
Slide 12: Value in force 2003 by class of business
VALUE IN FORCE 2003 by class of business Overview Accident & Financing Risk Life Business Center Health business business Section 1 HLR International 94.7% 5.3% 76.5% 23.5% - Who are we? HLR Germany (E+S Rück) 89.8% 10.2% 82.8% 17.2% Section 2 HLR Africa 95.1% 4.9% 2.0% 98.0% - Perform. measurement
Slide 13: Value in force 2003: sensitivities testing
VALUE IN FORCE 2003: Sensitivities' testing showing a robust portfolio in m. € Discount rate (RDR) Mortality/Morbidity Currency Lapse Overview EURO Exch. rate Business Center -100 bps prev. year +10% -10% +5% prev. year +10% -10% Section 1 HLR International 33.7 6.9 (18.0) 17.8 (29.7) 32.2 (13.0) 14
Slide 14: Value of new business (VNB): a healthy picture
VALUE OF NEW BUSINESS (VNB): A healthy picture in m. € 2003 Overview Business Center VNB VIF VNB/VIF HLR International/HLR Germany 144.4 764.0 18.8% Section 1 - Who are we? HLR Africa 3.3 8.5 38.8% Section 2 HLR America 53.0 196.3 27.0% - Perform. measurement HLR Australasia 5.5 96.6 5.7% Section 3
Slide 15: Value of in-force business: Revisited
VALUE OF IN-FORCE BUSINESS: Revisited In Life reinsurance, VIF has to be considered as the Overview Section 1 'mother of all profitability and performance measurements' - Who are we? as it Section 2 Æ monitors the expected cash-flows and liquidity streams – - Perform. measurement real money talks Se
Slide 16: Value of in-force business: Revisited (cont'd)
VALUE OF IN-FORCE BUSINESS: Revisited (cont'd) VIF model provides a lot of modelling flexibility Overview Æ New business of last year Section 1 - Who are we? Æ Existing business in selected Section 2 • regions - Perform. measurement • product lines Section 3 • customer groups - Case study Æ Pre/post
Slide 17: VIF: The mother of performance measurements
VIF: The mother of performance measurements Many other notions surrounding financial performance of Overview life insurers and life reinsurers are derived from VIF Section 1 - Who are we? Æ Embedded Value (EV) = VIF + net assets Section 2 Æ Market Consistent Embedded Value (MCEV) = - Perform. measur
Slide 18: Performance measurement: the subsequent phases
PERFORMANCE MEASUREMENT: The evolution from the early 90s until today Overview The subsequent phases Section 1 Æ Phase 3 (from 1999 onwards): - Who are we? A further refinement in the new world of US GAAP Section 2 Introduction of NCPV and stipulation of Financial Performance (FP) - Perform. measure
Slide 19: VIF reflection: The Hannover Life Re way
VIF REFLECTION: The Hannover Life Re way Overview 2000 2001 2002 2003 in m. € Section 1 (1) Hannover Life Re total VIF 874 1,048 1,206 1,361 - Who are we? DAC 597 906 979 1,275 Section 2 URL, DPL, FAS 113 treaties n/a 179 244 392 - Perform. measurement (2) Net DAC 597 727 735 883 Section 3 - Case st
Slide 20: NCPV: An economic interpretation
NCPV: An economic interpretation Overview Section 1 Æ The NCPV reflects the potential capital gain in the world of - Who are we? US-GAAP accounting realised by a complete sale of the Section 2 business to a third party willing to pay the VIF as - Perform. measurement a 'purchase price' Section 3 - C
Slide 21: Overview
OVERVIEW Overview Æ Section 1 Section 1 • Hannover Life Re – Who are we? - Who are we? Æ Section 2 Section 2 • Performance measurement: From statutory accounting to IVC - Perform. measurement Æ Section 3 Section 3 • Case study: IVC at Hannover Life Re UK - Case study Section 4 Æ Section 4 - Future c
Slide 22: Performance measurement: Introduction of IVC
PERFORMANCE MEASUREMENT: Introduction of IVC Overview Æ A systematic performance measurement tool for all four Section 1 Business Groups of Hannover Re worldwide - Who are we? Æ Allows for corporate taxes, allocated capital reflecting the volatility of underlying portfolio and actual cost of capital
Slide 23: HLR United Kingdom: IVC calculation
HLR UNITED KINGDOM: IVC calculation Overview in m. € 2002 2003 Section 1 Net Operating Profit after Tax (NOPAT) 11.4 15.1 - Who are we? Total Capital Allocated (TCA) of which 91.0 100.5 Section 2 Capital allocated/RBC 10.4 11.4 - Perform. measurement Capital allocated/Stockholders' equity-RBC 39.9 4
Slide 24: HLR United Kingdom: NOPAT calculation
HLR UNITED KINGDOM: NOPAT calculation Overview 2002 2003 in m. € Section 1 Net income 3.5 4.4 - Who are we? Section 2 Change in NCPV +7.0 +10.3 - Perform. measurement +0.9 +0.4 Net extraordinary gains/losses Section 3 11.4 15.1 - Case study NOPAT Section 4 - Future challenges ® 20 hannover life re
Slide 25: Overview
OVERVIEW Overview Æ Section 1 Section 1 • Hannover Life Re – Who are we? - Who are we? Æ Section 2 Section 2 • Performance measurement: From statutory accounting to IVC - Perform. measurement Æ Section 3 Section 3 • Case study: IVC at Hannover Life Re UK - Case study Section 4 Æ Section 4 - Future c
Slide 26: Future challenges: IVC and beyond
HANNOVER LIFE RE: Future challenges Overview IVC and beyond Section 1 Æ Learning experience with IVC for the seven business centers of - Who are we? Hannover Life Re Section 2 Æ Non-cash block assumption transactions – how to develop a - Perform. measurement more robust IVC concept for this class? S
Slide 27: Organic growth vs. acquisitions
HANNOVER LIFE RE: Organic growth vs. acquisitions Overview We are regularly examining opportunities for life acquisitions under Section 1 the following criteria - Who are we? Æ Strategic fit to our existing business model Section 2 Æ Fair price – if possible avoid auctions - Perform. measurement Sec
Slide 28: Organic growth will drive results
HANNOVER LIFE RE: Organic growth will drive results Overview Financial targets – organic growth scenario Section 1 Æ Premium revenues: We expect organic growth in all five - Who are we? business segments and a 10 – 15% p.a. overall increase (2004 = gross premium base of € 2,1 bn.) on US-GAAP Section
Slide 29: The future is bright
THE FUTURE Overview Section 1 The future is bright . . . - Who are we? Section 2 the best is yet to come for - Perform. measurement Section 3 - Case study Hannover Life Re! Section 4 - Future challenges ® 25 hannover life re
Slide 30: Hannover Life Re Mission Statement 2004
THE HANNOVER LIFE RE Mission Statement 2004 Overview Æ To develop and to implement Hannover Life Re as the Section 1 21st century role model for a new generation of successful reassurers, based on the following principles - Who are we? • To underwrite a diversified, profitable business portfolio Sec